China Aoyuan was downgraded to SD (Selective Default) from CCC by S&P after the developer announced that it did not repay borrowings worth $651.2mn nor did it reach an agreement with creditors on alternative arrangements. S&P says that the above may trigger cross-default and acceleration provisions on Aoyuan’s other obligations, including its offshore bonds. Aoyuan’s progress on selling its property management business and other projects has been slow with the net proceeds possibly falling short of its near-term repayment needs. Besides, Aoyuan has $688mn and $250mn of dollar bonds maturing in January and September 2022 respectively and faces high nonrepayment risk due to “exceptionally weak liquidity and lack of funding access”. S&P also lowered the long-term issue rating on the Aoyuan’s other rated outstanding senior notes to CC from CCC-. The rating agency has withdrawn its ratings on the developer on the latter’s request.

Aoyuan’s dollar bonds are at distressed levels of 21-24 cents on the dollar

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